In the modern business world, globalization is an important element that influences almost every aspect of an organization. In fact, in the past few decades, the concept of globalization has become a major factor in business life (Okpara, 2008). In most cases, globalization influences the approach of a business organization through growing their probable customer base as well as supply chain. Therefore, managers deem it necessary to account for the effects of globalization not only in the business and marketing strategies, but also structuring of the human resource department of the organization. Most importantly, globalization has had significant impacts on how and where businesses are located (La, 2010). To the end, the paper will be focusing on discussing the relationship between globalization and business location, in order to point out how globalization process may be seen as a positive or negative influence.
Besides, as a result of globalization, it is possible to locate production practices and service provisions almost anywhere globally, so long has the business has the capability of doing so. This gives businesses an opportunity to take advantage of low cost labour as well as other resource charges (Parker, 2005). In some cases, locating the business close to the resources of production rather than the customers is more cost-effective. This is usually the case if the transportation costs of final products to the market are much lower as compared to the production costs. Therefore, it is viable if the business is located at the source or close to the necessary resources, such as raw materials and labour, than otherwise; and this has been possible only because of the growth of the concept of globalization (La, 2010). Perhaps, most business people are of the view that this has been the main impetus behind the popularity of outsourcing in the modern business world.
Lastly, despite the above positive effects, globalization is a major contributory factor for increased competition in the market. With globalization, it is easy for businesses to venture into one market after the other (Okpara, 2008). Whereas this is seen as an opportunity for the expanding businesses, it is a great disadvantage for the local businesses, especially the upcoming. Usually, most local businesses lack the financial and man-power stamina, in addition to other resources, to effectively compete in the global arena (Etemad & Wright, 2003). Therefore, there are high chances that most local businesses will not make it up to the maturity stage because of high competition from the already established international businesses.
As an illustration, with regard a cheaper and resourceful location, in the last few years the UK has emerged as a business attraction center particularly because of its favorable financial services. Furthermore, to attract businesses, governments have focused on creating a low-cost location. Ireland, which provides “tax holidays” to businesses moving there, is a perfect example in this case (Homann, 2007). Countries such as Indonesia are attracting manufacturing businesses because of their low-wage. On the same note, most companies in the United States in 1990s were located within the country or in locations with relatively cheaper labour (Okpara, 2008). However, following the implementation of open market policies in China afterwards, most American companies ventured into China to take advantage of cheaper labour. As mentioned above, cheaper labour leads to reduced costs, which in most cases is reflected through larger profits.
In conclusion, globalization an important factor in the modern business world. From the above, it has been shown how it influences almost every aspect of the businesses, especially those with objective of venturing into international markets. In addition to other aspects, globalization has a greater influence on business location. For instance, with globalization business people have freedom of choosing where to position their businesses, in terms of location. This is especially the case when considering accessibility of a large pool of customers, the sources and costs of the necessary raw materials, and the costs of general operations. Nevertheless, globalization also has a negative influence on the location of businesses, especially with regard to competition. Particularly, competition hinders the growth and development of local businesses because they lack the required resources to compete with the already established international businesses.
Etemad, H., & Wright, R. (2003). Globalization and entrepreneurship: Policy and strategy perspectives. Cheltenham [u.a.: Elgar.
Homann, K. (2007). Globalisation and business ethics. Aldershot [u.a.: Ashga
La, B. L. (2010). How globalization works. New York: Rosen Pub
Okpara, J. O. (2008). Globalization of business: Theories and strategies for tomorrow's managers. London: Adonis & Abbey.
Parker, B. (2005). Introduction to globalization and business: Relationships and responsibilities. London: SAGE.